Oxford Media Convention, 21 January 2010
I am delighted to be here.
All of us derive huge pleasure from the rich and varied output for which this country is responsible – as viewers and listeners, as readers and increasingly online. Around the world, British film, music, computer games, magazines, fashion, design, advertising, architecture fire people’s imagination and bring them joy. Creative talent is a great source of national pride. There’s no better advert for Britain. And our strength in all those fields is of immense economic significance.
The creative industries account for over 6 per cent of gross value added – around £60 billion. Export earnings are around £16 billion a year – about four per cent of total exports. And some two million jobs.
As Minister for Digital Britain, it’s my job to secure future success in the creative industries. Making sure we have world-class infrastructure, a sound intellectual property regime and the right skills in the workforce. Government activism is a practical necessity. And let me set out the reasons why.
First, we’re emerging from the worst global downturn for 60 years. The world economy shrank last year for the first time since World War Two. Its essential after the challenges of the past couple of years – and the challenges ahead as the world economy returns to growth – that we make the most of the new opportunities which are opening up. This sector presents some of the best of them.
We have to focus on growth, on supporting sectors where we have the best chance to take advantage of existing strengths, create new jobs, and do well in emerging markets. The creative industries are at the top of the pile.
Second, given the environment in which you operate – where, to take just one example, digital communications are changing everything – coordination on a national scale is essential if we are to maintain our strong position. We need to be working together on the big challenges which the creative industries are facing.
The Digital Britain white paper, published last June, was the first comprehensive overview of the UK’s position as a digital knowledge economy. It had a clear assessment of the digital infrastructure we need, and the means to deliver it. Our aim is for creative industries which are flourishing, for people with the skills to participate fully in a digital society and for Government using the new technologies to deliver public services better than we did in the past.
I want today to highlight three challenges ahead. Successfully resolving them will underpin our ambition to be one of the world’s leading knowledge economies in the new digital era. The three are:
- Intellectual property;
- New business models.
We have two major broadband projects in the pipeline: a commitment that every home in the country should be able to obtain a 2 Mbit/s broadband service – and so be able to use the applications which most people are using broadband for today. And a next-generation fund to support national scale investment in much higher speed services.
We were slow to get started with broadband. I am now in my third stint as minister responsible for communications. We have seen the market delivering for us over the past decade. We have a very competitive market which can deliver decent broadband to around 90% of homes. Without intervention, it will make next generation broadband services available to around two-thirds of UK homes over the next decade.
But we need to do better than that. This will be the essential infrastructure for the future economy. I was speaking to a group of MPs from rural constituencies last night. One of them said broadband is now more important than mains electricity for remote parts of his constituency. If people are off the grid, they can just buy a generator, but, if they haven’t got broadband, they are stuck. So we have identified how to secure a billion pounds worth of investment over the next seven years so that the benefits of high-speed broadband stretches much further than they would do without public intervention.
We’ve published proposals to subsidise the roll-out of high speed broadband, covering at least 90 per cent of homes and businesses by 2017. Funding will come from the 50p per month levy on phone lines, and it is my aim for that to be included in the finance bill which will have to go before Parliament this side of the General Election.
This is a massive undertaking. We need to think carefully about the details of the levy, so that it’s fair and doesn’t penalise particular businesses or groups of people. We need to get the design of the overall scheme right, so there’s full value for taxpayers’ money. We will focus resources on areas that the market won’t otherwise reach, and we need to come out the other side with technical capabilities for use over the years to come. We’re consulting on all these points.
Access to high-speed networks will be a necessity for full participation in the global digital economy. Areas without them will be at a big competitive disadvantage. That is why public investment is needed.
I met a group of businesses in Plymouth last month.They told me that – in the past – they used to lobby for better road links or faster rail services. Today they see that the key now to the competitiveness of their city is cost effective digital links – and if they have them, then their creative businesses can compete with counterparts anywhere in the world.
And we don’t just see this as a national issue. Europe is turning its mind to EU 2020 – the economic strategy which will be the successor to the Lisbon strategy, dealing for example with how Europe prepares for the shift to a low-carbon economy. We have published this week our proposals for an EU Compact for Jobs and Growth, including our call for the European Union to develop a new broadband strategy, with pro-competitive measures to facilitate the rollout of high-speed services.
Second, intellectual property.
Nobody here needs any reminder from me about the importance of finding answers to the problem of online copyright infringement. Technological developments that have generated so many new markets, new platforms for content and exciting channels for creative expression have also overturned traditional business models. They’ve made content freely available to people who love what they’re getting but aren’t keen to pay for it.
Copyright infringement has been around for a long time. But in this digital age, it’s on an altogether different scale. And it is costing the creative industries hundreds of millions of pounds every year.
Government has to help in finding a solution. And it requires legislation.
We’ve introduced provisions in the Digital Economy Bill, being debated in the House of Lords at the moment, that will require internet service providers to write to those of their customers who are found by rights holders to be infringing copyright through peer to peer file sharing. Internet providers will also be required to make data available to rights holders, so they can pursue legal action against serious offenders. This approach will be backed by powers to impose technical penalties – like bandwidth capping or temporary account suspension – as a last resort.
It needs to be proportionate. And it needs to be underpinned by a clear and effective appeals mechanism. But the measures will achieve a big reduction in online infringement and – just as important – give rights holders space to develop new business models.
Cooperation from internet service providers is vital. The benefits of what we are doing will go to the rights holders. So I have not been convinced by the arguments of rights holders that the Internet companies should bear much of the costs. So this week, we have issued a draft statutory instrument setting out a 75-25 per cent split between rights holders – the primary beneficiaries – and internet service providers for the costs of enforcement action on copyright infringement.
Further discussion is needed about this. We have set out our argument, which is to encourage both rights holders and ISPs to keep costs down, to keep processes simple and efficient, and to continue to look for commercial solutions to copyright infringement. And I hope there will now be more fruitful dialogue between rights holders and Internet providers than there has been so far.
There’s real urgency here. We need the provisions in the Digital Economy Bill to make an impact quickly. That means putting a code of practice in place quickly. I hope interested parties will work with Ofcom while the Bill is still in Parliament so that the outline code can take shape. And the Bill also contains provisions to address infringement beyond the peer to peer file sharing which accounts for the bulk of the problem at the moment.
New business models
The final issue I want to cover is the need for this industry to come up with new business models – and what Government can do to help.
The space the legislation provides to develop those models will be important. But rights holders must get a move on. Legislation is not the whole solution to the problems. Rights holders need to develop new ways to make content available to people in formats that they want and at a fair price – reducing the incentive to break the law. Progress has been much too slow. We also need initiatives to educate people about why creativity deserves to be fairly rewarded.
The Digital Britain white paper announced a £10 million investment in digital test beds, providing low-cost, low-risk opportunities for companies to experiment with ideas and find ways to monetise new online content. The aim is to make progress on understanding how innovations like micropayment can help reduce piracy.
The test beds support companies to take part in consortia – testing applications, services and new ways of working. They should be up and running this Autumn – finding practical ways to reduce copyright infringement and help companies flourish in the digital economy. You need to seize those opportunities, and work out how you can be as successful in the future as you have been in the past.
We are seeing new consumer services emerging in the UK – like Sky Songs and Youtube’s partnership with Channel 4. We want services like these to thrive, just as Spotify did when Sweden introduced regulations similar to those we are putting in place. And research from DEMOS and others has underlined that better legitimate online services are the best way to stop people from sharing files illegally.
There’s a long way to go with the Digital Britain programme. I have set out what we are doing in three key areas – broadband, copyright, new business models. And new challenges, as yet unforeseen, will emerge too, and we will have to resolve them.
But we are good at all this in Britain. People who have been denouncing each other should be talking together. What I would ask is that all of us work together in the period ahead, to make the most of the digital economy, and to make a reality of the ambitions that all of us share.